Macy’s, the iconic New York department store chain, has announced the termination of its buyout talks with investment firms Arkhouse Management and Brigade Capital Management. The decision was made due to an unsatisfactory offer and a lack of clarity regarding financing. Macy’s claimed that the suitor’s did not meet its request for information, including the highest purchase price and details about the financing of the revised deal, by the June 25 deadline. Instead, Arkhouse and Brigade submitted a letter expressing interest in acquiring all of Macy’s outstanding shares for $24.80 in cash, which was within a range that Macy’s board had deemed “not compelling.”
The news of the termination caused Macy’s shares to plummet by 11.7 percent, closing at $16.85 on Monday. Neil Saunders, managing director of research firm GlobalData, criticized Arkhouse and Brigade, stating that they did not bring any long-term value to the table, apart from seeking to monetize Macy’s real estate assets for short-term gain. Saunders also argued that many of the activist investor proposals would have weakened Macy’s and hindered its ability to survive as a retail operation.
Instead of pursuing the buyout deal, Macy’s will focus on its own turnaround efforts. The company plans to close 150 Macy’s stores over the next three years and upgrade the remaining 350 stores. As part of its overhaul strategy, Macy’s will increase the number of salespeople in fitting areas and shoe departments. The company is also shifting towards luxury sales, which have proven to be more resilient in the retail industry. To cater to customers seeking higher-end services and goods, Macy’s will open 15 higher-end Bloomingdale’s stores and 30 luxury Bluemercury cosmetics locations.
Additionally, Macy’s is accelerating the expansion of its new small-format stores. The company aims to open 30 small-format locations by the fall of 2025, believing that these stores provide greater convenience for customers.
Despite the termination of buyout talks, Macy’s reported positive results for its most recent quarter. The company’s turnaround efforts showed promising signs, with sales and profits falling but surpassing Wall Street expectations. Macy’s reported earnings of $62 million, or 22 cents per share, for the quarter ended May 4. This compares to $155 million, or 56 cents per share, in the same period last year. Adjusted per share earnings were 27 cents, exceeding Wall Street’s estimated 16 cents. Revenue dipped by 2.7 percent to $4.85 billion, but it still exceeded analyst projections.
In summary, Macy’s decision to terminate buyout talks with Arkhouse Management and Brigade Capital Management was driven by an unsatisfactory offer and a lack of clarity regarding financing. The company will now focus on its own turnaround efforts, which include store closures, upgrades, and a shift towards luxury sales. Additionally, Macy’s plans to accelerate the expansion of its small-format stores. Despite challenges in the retail industry, Macy’s reported positive results for its most recent quarter, beating Wall Street expectations.
